"The Palestinians should first make peace and then declare their state," he said today in response to Abbas' bid for U.N. statehood. "Israel is prepared to have a Palestinian state but we are not willing to have another Gaza."

After weeks of diplomatic pressure led by the United States, Palestinian leaders, as promised, rebuffed those steps and submitted a letter to the United Nations for full membership and international recognition.

"It is no longer possible nor practical nor acceptable to return to conduct business as usual as if everything is fine," said Abbas.

"I respectfully disagree," he told Muir. "President Clinton knows very well [that] in 2000 at Camp David ... who really made the generous offer and the Palestinians refused to come. I'm sure that President Bush can tell you what happened at Camp David a few years later, when another Israeli prime minister made a generous offer, and the Palestinians refused to come."

Netanyahu said the goal posts had not been moved.

"Not at all," he said.

During his General Assembly speech today, Netanyahu challenged Abbas to resume peace talks in New York. He told Muir that the two had not yet met.

"I'm still here. He's in town," Netanyahu said. "If he wants to come right now, to this hotel, or to the U.N. or to his hotel or to your studios. We should be able to proceed on negotiations. From my point of view, we're ready."

Netanyahu's challenge to the Palestinian leader came at the end of a speech in which Netanyahu pointed to militant Islam and the Sept. 11, 2001 attacks as the principal reasons for holding back peace. He referred to Iranian President Mahmoud Ahmadinejad's speech Thursday in which he claimed that 9/11 was a conspiracy.

"Some of you left this hall," Netanyahu said. "All of you should have. Can you imagine that man who ranted here yesterday armed with nuclear weapons? ... If that man is not stopped, the Arab Spring could become an Iranian winter."

Netanyahu to UN: 'We Didn't Get Peace; We Got War'

Netanyahu said the 2005 Israeli withdrawal from the Gaza Strip was initially applauded by the world as a bold step. He pointed out that Israel had dismantled settlements, retreated to the 1967 borders and bulldozed synagogues.

"The theory says it should all work out," he said. "But we didn't get peace. We got war. We got Iran, which through its proxy Hamas kicked out the Palestinian Authority. ... When Israel left Gaza ... the moderates were devoured by radicals."

Netanyahu said he could not risk the future of the Jewish state on wishful thinking.

"The world around Israel is definitely becoming more dangerous," he said.